RXi shares plunge on plan to split, spinoff RNAi

Frustrated by the slow progress of RNAi technology, RXi Pharmaceuticals ($RXII) announced this morning that it will split its work, changing its name to Galena BioPharma and retaining a focus on experimental cancer vaccines while spinning off its RNAi technology under the RXi Pharmaceuticals banner. RXi CEO Mark Ahn will now be CEO of Galena as the newly spun off RXi plans to search for a new chief. RXi shares plunged 25% this morning.

In the split, institutional investors agreed to invest $9.5 million in RXi Pharmaceuticals and $2.5 million in Galena Biopharma. Galena also retains a minority equity interest in RXi with the potential to receive up to $45 million in milestones. The move underscores both the excitement around cancer vaccines as well as the profound disappointment that is bedeviling RNAi, once one of the hottest fields in drug research as researchers looked to modulate gene expression.

"Shareholders were demanding progress in moving our company forward," Ahn told Xconomy recently. "We knew how to deliver complex peptides to cells. We thought we could leverage that to go from just a research-platform company to a drug-development company."

"Galena will focus its resources on its lead product, NeuVax, a cancer immunotherapy that is expected to initiate its Phase III PRESENT study in the first half of 2012," Ahn says in a statement. "Galena also recently acquired Folate Binding Protein-E39, a targeted vaccine scheduled to commence Phase 1/2 trials by year-end 2011."